British Airways owner IAG mulls Norwegian takeover bid

Aviation giant IAG, which owns British Airways, has confirmed that it is keen to enter talks with Norwegian about a potential takeover deal.

Shares in Norwegian rose sharply today after IAG purchased a 4.6% stake in the budget airline.

IAG, which also owns Iberia, Aer Lingus and Vueling, confirmed suspicions that the purchase signalled a broader interest in acquiring the company. “The minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian,” it said. No talks have yet taken place.

Norwegian is currently the third-largest budget carrier in Europe and the eighth-largest in the world. Since launching its first long-haul services in 2013, the airline has become a major player in the transatlantic aviation business, offering low-cost fares to the US.

The company’s recipe for success, “bringing a budget airline model to the long-haul sector”, is “ruffling feathers in the aviation market”, says BBC business editor Simon Jack.

In June 2017, IAG launched rival low-cost transatlantic carrier Level, applying the same bare-bones business model. “Passengers can travel with just one piece of carry-on luggage, do not qualify for refunds, and must pay extra for an on-board meal or to pre-select a seat,” The Daily Telegraph reported at the time.

A spokesman for Norwegian did not comment on the airline’s stance towards a takeover bid, but said that IAG’s interest “confirms the sustainability and potential of our business model and global growth”.

However, City AM notes that Norwegian “has been battling rising fuel prices with question marks raised by analysts over whether it was growing too fast too quickly”.